It’s no secret that prices for both luxury condos and development sites are surging in Manhattan. Land prices in Manhattan’s most popular neighborhoods have doubled compared to two-to-three years ago.

The condo developers winning the bids for these sites and pushing prices higher than what their competitors were willing to stomach are each gambling that sell-out prices will hold steady or rise.

“Manhattan land prices nearly doubled in the last 24 months,” said Alan Miller, managing principal with Soho-based brokerage and advisory firm 5Points Group. “That type of exponential growth can’t continue, [but] developers and investors will continue to push land prices upward. Everything is benchmark pricing. That is the new normal.”

Miller said he expected the run up of record-setting deals to slow. “Prices cannot continue apace. It has to be stopped at some point. I put away my crystal ball and stopped thinking about how and why the project will make money.”

To determine which developers have risked the most by paying above the going market rate in their purchase of developable sites, The Real Deal reviewed over two dozen closed and in-contract property trades of $50 million and up from the last year, using data from brokerage Massey Knakal Realty Services and news reports. Then we took it a step further and compared the per-square-foot purchase prices with average per-square-foot selling prices for nearby new luxury apartments. To do that, we came up with three comparable “peer buildings” for each development site and reviewed their listings and in-contract prices on the real estate website StreetEasy.

We also looked at the top 15 priciest development sites that either sold or went into contract Manhattan-wide in the last year (see accompanying chart).

Of the 3.5 million buildable square feet of residential space that TRD reviewed — which equates to roughly 1,000 to 2,000 large apartments — we found land prices ranging from as low as $262 per square foot for a site in Lower Manhattan to more than $1,400 per foot on West 58th Street.

In addition to buying the site, Manhattan developers typically allot $500-to-$600 per square foot for hard construction costs and another $150 per foot for soft costs, including architects and marketing fees. Of course, developers also lose some of their buildable square footage because they can’t sell common areas, reducing their net sellable prices by $100 or more per foot.

That means a development site purchased for $700 per foot has to sell out at a blended rate of about $1,550 per square foot to break even. That’s well below some average residential condo sell out prices of $2,500 per foot, but developers typically want to double their equity, which makes that big buffer suddenly look thin.

It’s the “last dollar,” a term used to identify the project’s breakeven point, that developers keep a steady eye on.

Joshua Zegen, managing principal with investor and lender Madison Realty Capital, noted that right now, the supply and demand for new luxury Manhattan condos is essentially even. But with land prices so high, an increasing number of developers are buying sites at numbers that force them to sell at the highest-end of the spectrum. That, he said, could create an over-supply of luxury residential inventory.

“I don’t know if future [condo] product will be absorbed at the same pace,” Zegen said. “Surely not every project can sell out at $3,000 per foot. And land is trading as if they all will sell at $3,000 per foot.”

Nonetheless, developers are continuing to gamble, betting on these risky properties and hoping that buyers keep lining up.

Here’s a look at some of the riskiest Manhattan land purchases by neighborhood over the last year.

Priciest Manhattan development site sales

Address

Neighborhood

Buyer

Price

Price Per Square Foot

225 West 58th Street

Midtown

Vornado Realty Trust

$168 million

$1,400

219-223 West 77th Street*

Upper West Side

n/a

$61 million

$792

55 West 17th Street

Union Square

Toll Brothers

$69 million

$745

542 West 21st Street

Chelsea/High Line

Casco Development

$50 million

$726

511-525 West 18th Street

Chelsea/High Line

Related Companies

$200 million

$700

130 East 23rd Street*

Flatiron

Toll Brothers

$135 million

$684

269 West Street

Tribeca

Related Companies

$115 million

$672

146 East 50th Street

Turtle Bay

Ceruzzi Holdings

$86 million

$604

210 West 77th Street

Upper West Side

Naftali Group and Carlyle Group

$55 million

$603

101 Murray Street

Tribeca

Witkoff Group, Fisher Brothers, Vector Group

$223 million

$598

21 West 55th Street

Midtown

Assa Properties

$60 million

$595

180 East 88th Street

Upper East Side

DDG

$68 million

$538

219 West 28th Street

Chelsea

HAP Investments

$50 million

$523

512 West 36th Street

Hudson Yards

Spitzer Enterprises

$88 million

$509

125 Greenwich Street*

Lower Manhattan

Shvo

$180 million

$501

Source: Data is for closed and in-contract Manhattan deals of $50 million or more for the last year. Data came from Massey Knakal Realty Services reports and news reports. Analysis conducted by The Real Deal. In-contract deals are noted with an asterisk.

Broker turned-developer Michael Shvo signed a contract to purchase 125 Greenwich Street (also known as 22 Thames Street) last month. That bests any closed sale over the past year in Lower Manhattan.

Shvo agreed to pay the Witkoff Group, Fisher Brothers and others $180 million, or $501 per buildable per square foot, for the site, which sits a few blocks south of the World Trade Center. While that might be small potatoes compared to the prices that development sites are fetching in other areas — sites in Tribeca, for example, have recently sold for more than $600 per square foot — for comparable sites in Lower Manhattan, it’s a big number.

“The Financial District will always be a discount,” one insider said.

The site, which has 360,000 square feet of development rights, was among the largest of the properties TRD reviewed. Witkoff and Fisher Brothers were planning a massive 900-foot-plus tall tower designed by Rafael Viñoly, with 70 floors slated for rentals.

But according to published reports, Shvo, who did not respond to requests for comment, will redesign the building as condos.

Some sources point to the high prices that Silverstein Properties is asking for 30 Park Place on the border of Tribeca and the Financial District, which will include a Four Seasons hotel, to justify Shvo’s expensive pricing.

The Silverstein building, for example, is asking an average of more than $3,179 per square foot for active listings among the 157 apartments on the upper floors of the 960-foot, under-construction tower, StreetEasy showed. That project, sources said, is already driving up prices for developable sites in Lower Manhattan, with prices more than doubling there in the last two years. Shvo’s purchase is a prime example. He paid nearly $93 million more than the $87.5 million Witkoff and Fisher paid for the site in September 2012.

Still, despite pricier listings in the area recently, the numbers show that Shvo is making a play in an untested luxury market.

According to StreetEasy, only one building in 125 Greenwich’s submarket — 123 Washington Street — has closed condo sales for more than $2,000 per square foot. Last month, it had 29 listings or contracts for an average price per foot of $2,307.

However, even as Shvo’s purchase, which was brokered by Andrew Scandalios of HFF, was record-setting in terms of price per-square-foot for a Lower Manhattan development site, some think prices could go even higher.

Robert Knakal, chairman of Massey Knakal, is marketing a massive site for Pink Stone Capital one block south of Shvo’s location, at 111 Washington Street, with more than 362,000 buildable square feet, for $260 million, or $718 per square foot.

Just west of Union Square, Toll Brothers paid $68.5 million for a 92,000-square-foot mid-block development site late last year. That came to a price per buildable foot of $745, the highest in the area over the last year, TRD found.

Toll filed plans in April to build a 91,714-square-foot, 18-story condo building with 55 units designed by Morris Adjmi Architects on the spot between Fifth and Sixth avenues.

The location has no special charm, but there are successful new condo buildings nearby.

The most high profile of the bunch is Walker Tower, the large Verizon-building conversion at 212 West 18th Street — two blocks west and one north. It’s listing apartments for more than $6,000 per square foot, with an average sell out price of more than $3,425 per foot in closed sales, figures from data and referral firm CityRealty showed.

Together Walker Tower and the other top luxury projects in the area — 35XV by Alchemy Properties and 245 West 14th Street by Alfa Development — have an average of about $3,667 per square foot for listings and in-contract sales, TRD’s analysis found.

But setting aside Walker Tower, that average comes to only about $2,400 per square foot. Given what Toll paid for the site, however, sources said the firm would have to shoot higher than $2,400. The company declined to comment.

Jonathan Miller, president of appraisal firm Miller Samuel, said developers are buying land in areas where condo pricing does not typically support such a project, so it is hard to predict success.

“The product being built now is much more disconnected from the neighborhood that it is situated in,” he said, talking generally and not about the Toll deal.

Nonetheless, insiders said Toll has development advantages.

For starters, because it’s a large national luxury homebuilder, it can run on lower profit margins than many local players can.

Toll is also becoming something of an expert in the neighborhood, with four projects in the immediate area. To the east, it has a 99-unit condo under construction at 400 Park Avenue South — where the average price per foot is expected to be $2,576, information filed with the New York State Attorney General’s office showed. And a few blocks farther into Gramercy, it has sold more than half the units in an 82-unit condo, at 160 East 22nd Street. Those units went for just over $2,000 per square foot, probably not enough to make a profit at the new site, sources said.

In addition, the company is set to close later this year on the United Cerebral Palsy Building at 130 East 23rd Street. The site, which it plans to redevelop into condos, went into contract for $684 per square foot and was brokered by Avison Young.

Vornado Realty Trust spent $194 million to purchase a 137,000 square feet site at 225 West 58th Street in October.

The parcel was needed to expand the site for the firm’s high-profile 160-unit 220 Central Park South. The 920-foot tall residential tower will occupy 472,000 square feet at a total cost of $850 million, Vornado’s 2013 annual report said.

The eye-popping $1,400 per square foot land price is tempered because Vornado already owns significant development rights for the project that cost far less.

The aggressive price it paid for the 58th Street site was driven by comps from two of the highest priced new condo projects in the city: 432 Park, which is being developed jointly by CIM Group and Macklowe Properties; and One57, which being built by Gary Barnett’s Extell Development.

The average price per square foot for listings and in-contract sales at those two buildings and at the swanky nearby 15 Central Park West was $7,391 last month, according to TRD’s analysis.

Yet sources say said Vornado and the other developers building über-luxury condos in the area right now are taking a risk, because there are a slew of comparable high-end projects coming to market now and over the next few years.

In addition to 220 Central Park South, One57 and 432 Park, there’s 111 West 57th Street, the super-skinny tower being planned by JDS Development and Property Markets Group. Together those buildings are delivering more than 400 units.

“There is a lot of competition coming on the high end in this newly dubbed “Billionaires’ Row,” said Peter Culliney, director of research and analytics for CityRealty. “For a developer it will be more of a shark tank then a day at the club.”

Tribeca is, not surprisingly, one of the most expensive markets for condos in Manhattan.

Related cracked into the market with its purchase of 269 West Street for $115 million, or $672 per square foot, from the infamous Ponte family in March. Related already has a successful condo project farther north, at Superior Ink at 400 West 12th Street, and has several rental buildings nearby.

While $672 may not be record-breaking for Tribeca, it is testing the market for development sites that far west.

The site, with nearly 172,000 as-of-right buildable square feet, takes up most of the city block between Desbrosses and Vestry, and West and Washington streets. And given that it sits on West Street, the units will have unobstructed views of the Hudson River. However, no development plans have been filed, and Related declined to comment.

Related has two other development sites nearby: 261 Hudson Street, where it’s planning a 201-unit rental building and 460 Washington Street, which is expected to have 107 units, although it’s unclear if they will be rentals or condos.

But the bulk of the most expensive apartment units in Tribeca are east of Greenwich Street, including the Herzog & de Meuron–designed 56 Leonard, 30 Park Place and 11 North Moore Street. Each of those buildings has an average price per foot for listings and in-contract units above $3,000 — with 56 Leonard taking the top spot with a $3,317 average.

Meanwhile, the priciest new development west of Greenwich Street is Taconic Investment Partners’ the Sterling Mason, at 71 Laight Street, with an average contract price of about $2,780 per foot.

Related, insiders said, has the advantage of being a massive company with buying and borrowing power that enables it to hold down costs.

But insiders said to sell at the numbers they need to make their projects a success developers must target their buildings to specific buyers.

“When you are building super luxury, or any building, who do you build it for?” said Jon Epstein, a principal with Avison Young. “Is a Gillette razor better than a Schick razor?”

Related isn’t alone in pursuing a project this far west in Tribeca. In July 2013, the Witkoff Group and partners purchased 101 Murray Street for $223 million — or slightly less $599 per square foot. Although also fronting West Street, that site is separated from the Hudson by the residential towers of Battery Park City.

Casco Development is one of several first-timers taking a shot at building condos in Manhattan. And the firm paid a hefty $50 million, or $726 per square foot, in January for its debut site at 542 West 21st Street, which is nestled between the High Line and West Street.

The company, owned by real estate investor Uri Chaitchik, plans to construct a nearly 70,000-square-foot project, with a portion devoted to residential condos and the balance as commercial, as zoning there allows, insiders said. Casco did not respond to a request for comment.

The broker on the sale, Stephen Powers of Denham Wolf, said potential site buyers had to consider the blended rate for both the commercial and residential uses to come up with final purchase price. In doing so, most of the five firms involved in the final round of bidding valued the site’s residential portion at about $1,000 per foot, while the commercial portion was valued far lower. “After the fourth floor, you have unobstructed views,” Powers said, explaining the valuation.

He said he wasn’t worried about the area getting saturated with condo units, because the projects there are not all expected to launch simultaneously. That, he said, will help keep prices stable.

“You don’t want a bunch to hit at about the same time,” Powers said.

Insiders said the developer is expecting to sell above the $2,500-per-square-foot mark.

The three most expensive nearby new construction condos — SR Capital’s under-construct 551 West 21st Street, Sherwood Equities’ 500 West 21st Street and the Tamarkin Co.’s 508 West 24th Street — had an average listing and in-contract per square foot price of $2,843, with the Sir Norman Foster-designed 551 West topping the list with an average of $3,430.

Casco’s expensive land purchase might not stand out for long.

Last month, investor Alf Naman brought a smaller parcel to market in the area at 532 West 20th Street. The site, with 27,500 square feet of development rights, has an asking price of $982 per square foot, according to James Nelson, a broker and partner at Massey Knakal, who is marketing it.

If the Naman parcel sells for its asking prices, it would best Shvo’s nearby purchase of 239 10th Avenue. Shvo made headlines for his $23.5 million July 2013 purchase of the former Getty gas station site, which broke a per square foot price record for the neighborhood at $850. That buy, however, was not included on TRD’s list because it was under the $50-million-mark.

Nelson said he was confident Naman’s site would compete.

“I think local developers will take a strong run at it but this could be a great site for a first time domestic or foreign buyer,” he said.

In December, developer DDG paid $67.6 million for a site with 130,000 buildable square feet at 180 East 88th Street. The per-square-foot price of $520 was the most expensive for the Upper East Side in the last year.

It’s planning a residential condo tower with frontage on both 88th Street and Third Avenue.

Sources said the deal could be risky because few new developments along Third Avenue are selling for more than $2,000 a square foot.

One exception to that is 200 East 79th Street, a 45-unit building on Third Avenue completed in 2011 by Skyline Developers. Last month, that building’s listings and in-contract units averaged $2,556 per foot. Meanwhile, the average listing and in-contract price for luxury units in the area was $2,541 per square foot, according to TRD’s analysis of StreetEasy figures.

However, two of three buildings used in calculating the average were on Lexington Avenue, which fetches higher prices than Third Avenue does. (We excluded projects on Park and Fifth avenues because they have far more cache than Third Avenue.)

One key advantage DDG has is that there is little new development in the area.

Only one other large development site is in contract nearby. Builder Stillman Development is in contract to pay $82 million for 151 East 86th Street, a 210,000 square foot mixed-use project. That site, however, is priced at $390 per square foot — far lower than DDG’s parcel.

DDG declined to comment on the project.

There are other big developers eying the neighborhood. Extell, for example, is assembling a site at Third Avenue and 94th Street.

Last summer, the Naftali Group bought a Hertz garage site on West 77th Street for about $600 per square foot.

Now a year later, a site across the street, at 219-223 West 77th Street, is in contract for about $792 per foot — a more than 30 percent jump. Insiders expect the unidentified buyer to demolish the existing building and build residential condos.

Sources say the $792 price tag means the developer will have to sell out condos for $2,500 or higher.

However, an analysis by CityRealty found that Linden 78, a 35-unit building at 230 West 78th Street, developed in 2009 by Urban Residential, saw the highest closed per-square-foot sales prices in the immediate neighborhood this year. Prices there averaged only $2,204.

The most expensive project with active listings and contracts is the Stahl Organization’s Laureate, at 2150 Broadway, at $2,889 per foot, according to StreetEasy. The most expensive comparable listings and in-contract deals in the area, meanwhile, average $2,615 per square foot, according to TRD’s analysis.

Vincent Carrega, who marketed the West 77th Street site with his Avison Young team, declined to comment on the deal.

Generally speaking, however, he said not every developer buying at a high land basis will be able to sell out at the numbers they’re looking for.

“There is such a shortage of product,” he said. “[But] that does not mean that there are not poorly executed or poorly conceived [projects], that don’t sell.”

On a TRD panel in May, developer Miki Naftali, CEO of the Naftali Group, said residential values can’t keep climbing.

“At the end of the day, if someone thinks that prices tomorrow or six months from now will continue to grow at the same pace, it’s a mistake,” he said.